Tag Archives: lodi

FED vs Supply/Demand

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Good morning!

Happy Friday.  We received some much needed rain in our area last night which was a nice way to start to the weekend.  Crude prices continued their run higher this week as crude inventories continued to decline in the US with record demand.  Anticipation of continued world demand is also keeping a strong bullish sentiment on energy commodities.  However, the FED on Thursday dropped some hints that rate increases will be moved up as well as increases of their inflation forecasts.  The dollar rallied against the main basket of currencies yesterday causing a midday crash in crude prices of over $2/barrel.  However, the crude markets recovered by the end of day and are surging ahead to end the week.  The energy markets seem to be all-in on a bullish run believing that supply will be tight around the world by end of summer.  I am not fully convinced of the bullish attitudes considering there is still a staggering amount of world crude production sitting on the sidelines waiting.  Meanwhile, the US has recovered to 11M bpd crude production with 92% refining capacity, and crude inventories are still dropping.  What the scenario says to me is that possibly our crude exports are very healthy.  Eventually, our competition is going to want a piece of that pie.  I could see someone blinking over the next few months and causing a correction in crude prices.

Although crude prices have increased, gasoline and diesel prices eased a bit due to continued increasing refining utilization and building inventories.  I expect to see gasoline retail prices hold near $2.79/gal and diesel prices near $3.00/gal.

Propane cost has continued to rise and does not seem to be showing any signs of decreasing.  Future pricing also continues to hold even though we are going into summer season.  I would like to point out, that although propane prices seem high, when looking at the cost of propane in comparison to crude oil, the current pricing on propane has good value.  Until crude prices collapse, I just don’t see propane prices falling lower.  When coupling high crude prices with lagging inventory builds, unfortunately I think these current prices on propane will be here to stay for a while.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

WTI Crude Over $70/Barrel and Propane Prices Climbing

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Good afternoon!

WTI price continued the climb this week and finally broke $70/barrel.  Demand coupled with a weaker dollar and overall exuberance are keeping prices inflated.  When I look at the data coming out of the inventory report this week, I am seeing a picture that feels very heavy on crude prices.  Supplies are great, refinery runs are increasing, and refined product levels are increasing.  Even though crude inventories diminished again this week, the details are showing that we are only refining more crude to store gasoline and diesel.  If China continues to shut down parts of the country and there are any other setbacks across the globe or a demand drop comes to the US, crude prices could tumble.  I have a feeling that OPEC+ will continue with their plan to keep crude production increasing, especially after the US said they will not be lifting sanctions on Iran until time has passed in a possible new nuclear deal.  Other data showed a 5% CPI increase in May and the spread is making it’s way into all areas of travel vacation.  Time will tell if eventually demand starts to take a breather in the US.

In local retail news, Bp Whiting finally put their refinery back online.  Although spot market cash differentials dropped a bit on the Chicago exchange, the continued increase in crude prices has offset much of any relief in retail prices at the pump.  However, current prices at the pump will at least hopefully take a breather from much more upside movement.

I have been ringing the alarm bell for months.  Propane prices continue to rise this summer.  Nine times out of ten, propane prices drop dramatically in the summer.  This is that one year.  Propane price is coupled much with crude prices.  So as crude prices remain high, so goes propane.   In addition, national inventories are still below average, although some good builds hit the market the last two weeks.  For now, propane has ignored cues on inventories and is following the price of crude.  I do not expect to see propane prices fall to normal summer lows.  I also recommend that everyone contract their anticipated propane needs for next heating season.  I hope to have our contract pricing out by the end of June or right after the 4th of July.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

WTI Crude Price Almost to $70/Barrel

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Good afternoon,

Crude prices continued their push higher towards many bankers’ hopes of $70/barrel.  Throughout the week, continued news stories push the narrative of higher prices.  We closed the week with WTI at $69.62/barrel.  The last time we were holding these prices and climbing was in January of 2020 and the world economy was on fire.  Spike in world demand and potential tightening of crude supply are the main drivers of price right now.  However, in the US, crude inventories decreased, but refined product inventory increased.  So a lot of crude was refined into products and stored.  And Russia is threatening to leave “the dollar” as the closing currency for crude trades.  Ands OPEC+ is discussing further increased outputs in June.  In addition, the US is not adding rigs very quickly but a lot can change in the coming months.  I’m seeing a potential for crude prices to start falling at some point this summer.

In local news, gasoline retail prices are inching closer to $3/gal.  The national average retail price for gasoline is now over $3/gallon.  Diesel retail prices have broken through $3/gallon.  But diesel prices are a bit higher due to a refinery issue the largest refinery in the Midwest: Bp Whiting.  The issue has lasted a few weeks but looks to be fixed, so I expect the cost of diesel to ease a little in our market over the coming week.  But don’t expect the price to drop at the pump if crude prices stay high.

Propane inventories finally displayed a large inventory build.  Although most of the builds were on the Gulf Coast and the East Coast.  The Midwest supply is still under the five-year average.  We must continue to increase Midwest inventory.  If we don’t and we have a very cold winter, supply will be tight and much pressure will be put on the pipeline and railroad support.  Prices have finally taken a breather but could still go higher if inventories do not increase in the coming weeks.  Contracts for next season should be released at the end of June or early July.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

WTI Crude Oil Falls Below $65/Barrel Support

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Good morning,

This week crude prices tumbled on the news of Iran and US approaching a new nuclear deal.  The deal would allow Iran to sell crude through transparent channels on the open market.  With the additional crude supply from Iran hitting the market, Saudi Arabia would have a hard time allowing Iran to take customer share.  Therefore, traders are thinking that crude has the potential to fall into surplus if demand does not ramp up quickly.  In addition, with inflation running hot, COVID-19 making a resurgence in East Asia, and supply chains a mess, portfolio managers are starting to move from risky assets into more stable investments.  Along with the small crude correction, crypto currencies experienced nearly a 30% correction this week as well as sell-off’s in tech investment.  As managers look to place their bets for the remainder of the year, some are saying the FED will announce a taper of their bond buying program in the second half of the year.  I think that WTI might trade in the range of $60-65/barrel until we get closer to the OPEC+ meeting in June.

Local retail prices have peaked for the time being given the slight correction in refined products this week.  I would expect to see some cheaper street prices on gas and diesel towards the end of next week possibly, but not much.

Propane prices are holding very firm.  Inventory continues to be very low in the country at a time when levels should be building.  Exports remain high and demand is still holding stronger than normal.  Production is also high, so if demand tapers at all we can start to rebuild quickly.  However, we are under the 5-year average at this time.  I do not expect to see summer-fill prices get much lower this year, if at all.  The only good news in propane is that Canadian inventory levels of propane are building at levels greater than last year.  So if the US falls short, with rail economics being attractive for the coming year, we should be able to supplement large amounts of propane from Canada.  But, this is also dependent on the reliability of the railroad transport system which has been very chaotic the past few years.  I am looking to release next season’s heating contract pricing the last week in June.  More info to follow.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

The Gasoline Shortage That Wasn’t

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Good morning,

The big news this week was the hacking of the Colonial Pipeline in South Eastern USA.  The ransomware attack shut down the largest distribution pipeline causing massive panic buying fueled by constant media reports and disinformation.  I shook my head as gas stations all over the East Coast started to run out of fuel.  In addition, the misinformation caused panic buying in states that are not even supplied by Colonial.  Down in southern Florida, stations started to run out of fuel and even in Wisconsin, lines formed at the pump to panic buy based on fears of price spikes and supply problems.  The truth is that there was never any spike in cash price markets in the Gulf Coast or New York Harbor.  In fact, a gallon of base price gasoline continued to trade at a CHEAPER rate than the Chicago market!  Go figure…  So the media hype of the week made a potential supply problem into a disaster that could have been avoided with accurate reporting.  Colonial has reported that they were operating on “outdated Microsoft Windows” and decided to pay $5M in ransom for their information to be returned.  The information that was stolen contained which companies owned what products and the volumes there of throughout the entire pipeline.  Therefore, the information was very valuable.  Crude oil prices traded up this week on the news of the pipeline hack, along with Israel/Palestine conflict, and potential increased demand outweighing the disaster in India.  This week was a perfect example showing how the media can affect commodity prices and unfortunately business/consumers outside of the Colonial issue paid the price.

In local news, cost of product continues to slowly tick higher.  Retail prices of both gasoline and diesel are holding near $3/gallon and I don’t expect to see much relief until possibly after Memorial Day.

Propane prices also continue to be stubbornly higher than normal.  Although our country experienced a nice rebuilding in national inventory this week, prices continue to hold firm with crude’s movement and high rates of exports.  I’m not quite sure we are going to see much lower prices until possibly later into end of summer or early fall based on inventory levels and potential corn drying demand.

As always, if you have any questions, please feel free to give us a call.

Best regards,

Jon Crawford

Crude Trying To Push Through A Psychological Barrier

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Good morning,

Despite rising production in the US and OPEC+, a lackluster US jobs report, and an absolute disaster in India, traders continue to try and push WTI prices through the psychological and technical barrier of $65/barrier.  If WTI is able to hold gains above $65/barrel, then traders are going to try and go to $70/barrel.  The issue with the continued push higher is that gasoline and diesel retail prices will hold steady above $3/gallon.  Once retail hits these prices, many organizations, producers, and countries take notice.  I am still under the impression that major investment firms took long positions on crude contracts and need to push prices near $70/barrel before they can sell and regroup.  OPEC+ will be meeting again in June and I can’t imagine there will be any barriers to holding back production.  We are starting to see OPEC+ offer discounts on exports as well.  Another issue floating is the Fed interest rate.  Although Treasury Secretary Yellen is saying rates might need to bounce this year to cool things off, the Fed Chair Powell is saying “steady as she goes”.  At this point Powell has not even mentioned reducing the bond buying program.  So as long as we continue on this track, the strength of the dollar will be held down keeping crude prices higher.  But if India continues on their path and the US holds stagnate, eventually demand for crude will overtake the weaker dollar and cause commodities to fall in price.

In local retail news, I was wrong.  I did not expect to see diesel retail prices break $3/gallon, but they have and will continue to hold at this rate.  Gasoline retail prices are also inching closer to $3/gallon as well.  There does seem to be some exuberance in the air unwinding out of COVID and the school year.  We could possibly see the old fashioned run-up on prices to Memorial Day weekend, then sell-off in June.  Only time will tell.

Propane prices are holding firm.  Spot markets are not going any lower at the moment.  With colder weather hanging around, propane inventory building season is off to a slow start.  I am cautiously optimistic that prices will ease, but probably not until July.  I also do not expect next season’s contract pricing to be out until mid-July due to the longer heating season and current future’s pricing economics.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

Pump Up The Jam

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Good morning!

Crude prices continued to move higher this week with a small relief starting on Friday.  High hopes of economic recovery are fanning the flames of anticipated record demand.  Many investment banks and so-called “industry experts” are saying we will experience the largest demand increase in history over the coming months. Goldman Sachs continues to push their crude call-price higher and higher saying a 5M bpd increase is going to cause shortages and supply tensions.  In fact, the amount of “pumping up price” talk going on feels like when crypto annalists get on the airwaves to move the price of Bitcoin.  I like to take a step back and look at the big picture.  Yes, demand increases are coming.  We might even experience a 5M bpd increase.  However, there is almost 15M bpd crude production offline voluntarily between OPEC+ and the US!  In addition, Libya just released their hold on crude exports.  The US is looking to allow Iran to increase exports with transparency in exchange for a new nuclear resolution.  Russia and the US are starting to bicker and Russia is not afraid to play politics with their oil supply.  And at these high prices, OPEC countries could finally start to take advantage and make some money.  In addition to the crude markets being well positioned to increase production, refineries in the US still have an additional 10% of increased capacity to meet local demand!  And most refiners locked in crude prices at lower prices so there is nothing holding them back from refining crude!  In other words, the crude market is feeling very frothy with “pumping up price” stories.  I think we could see some higher prices until greed takes over and surplus production starts to enter the market.  But after 2020, who knows!  As always, this is just my theoretical analysis.  In the world of commodities, anything can happen.  🙂

In local retail news, gasoline and diesel prices continue to climb.  Diesel retail prices are getting very close to $3/gal.  In fact, I saw a few smaller markets with diesel prices over $3/gal.  Gasoline retail is holding near $2.74/gal in most markets.  I was quite surprised by the run up in price this week.  If the markets were truly being “pumped up” to cover a squeeze on future options, we could see some relief on pricing in May or June.

Propane prices have started to rise again in tandem with crude oil.  Propane supplies are tight as we start the rebuilding season, but not as bad as years past.  In addition, April has been much colder and May is not looking to start out much better.  The wild card compared to years past is high levels of exportation which we are watching closely.  I do not think that summer fill prices will get much lower than today’s prices.  With so much uncertainty in the propane market, I also do not expect to see next season’s contracts released until mid July.  For now, it’s all about being patient and waiting for the right opportunity.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

STEADY AS SHE GOES

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Good afternoon,

Well, the energy markets were fairly calm this week.  Not a lot of movement on crude prices or refined products.  Even though the US, China, and Europe are showing signs of strong recovery coupled with a somewhat tighter supplies, the massive outbreak in India is putting a tight cap on any upside movement.  And as the recoveries begin in some major parts of the world, the reality of the total crude barrels today being voluntarily removed from the market is starting to become a factor.  Although demand is returning with tighter supplies, over 10M barrels/day of crude production is being voluntarily withheld from the market.  As the appetite for crude increases, I have never seen producers remain disciplined for very long.  I am not seeing anything that would cause a massive selloff into the $40’s again, but I do think the talk of extended WTI pricing above $70/barrel is a bit wishful.

In local retail news, gasoline prices have remained higher near the $2.75/gal price point.  Diesel retail prices have remained under $3/gal except for a few larger truck stop chains.  I am hoping that we top out around these prices, otherwise the massive amount of savings from stimulus packages will end up in fuel tanks.

Propane is continuing it’s cautious moves into summer.  We are officially at the third lowest level of inventories over the past 10 years.  The major difference between now and then is exports.  Our export capacity is nearly double compared to other years of low inventories.  I am a bit cautious on whether or not propane supplies will be able build to a point of calm going into winter.  Because of the current supply conditions, allocations and multiple supply points will be vital for success.  I do not expect to see propane prices go much lower.  I am also not seeing much movement on futures pricing.  Unfortunately, I think propane prices for next winter will be near the prices of today.  Hopefully we can maintain prices under $1.50/gal which is usually a good bench mark for good value in comparison to other forms of energy.  More to come on this as we go through May and June.  Stay tuned!

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

Crude Prices Take A Jump Higher

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Good morning,

The markets were fairly quiet and calm this week except for Wednesday.  On Wednesday, the EIA released their weekly inventory report and the drawdown on crude oil inventories was almost 6M barrels.  The report supported the statements from many shale oil producers saying there were going to hold off on pumping crude back into the market too quickly.  In addition, demand for gasoline and diesel fuel outside of jet fuel is starting to return.  Crude prices spiked over $2/gallon this week.  But, OPEC+ is slowly unwinding their cuts and I do think that eventually someone will blink.  China and India are increasing imports at a dramatic rate and all producers want a slice of that pie.  In addition, Iran and the US continue to try and negotiate a new nuclear deal that will allow Iran to export more oil with transparency.  So although we are experiencing this slight uptick in crude price, I don’t see the trend continuing too much higher.

In retail news, gasoline cost continues to go up, and retail prices continue to go down.  Therefore, I expect to see retail gasoline prices jump fast past $2.69/gallon at any moment.  Diesel retail prices have eased a bit, even though cost has increased.  But I don’t see diesel retail prices going over $3/gal anytime soon.

Propane prices continue their slow and cautious moves lower.  The cold snap in April will provide a bit of support for prices, but national inventories are slowly starting to rebuild.  We have a long ways to go to move our national inventory above the five-year average.  Therefore, I still see prices being higher than usual for summer.  I still believe that customers should consider taking delivery of any contract gallons left on account by end of April.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

Crude Prices Trading in Narrow Range

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Good morning,

Crude prices traded in a very narrow range this week.  Supplies are ample and demand is healthy in the largest economies, but the virus variants and targeted lockdowns in various countries are keeping any major price runup in check.  On the downside, a potential deal with the US and Iran is back on the table which would throw the crude markets into supply surplus.  The beginning of talks is putting downward pressure on crude prices, but not too much pressure as the negotiations with Iran are usually quite volatile and unpredictable.  For now, WTI crude price seems to be in a holding pattern around $59/barrel.  Jobless claims were a bit higher than expected and small business closures are climbing which is keeping American demand in check.  However, vaccinations are flowing at a record pace and a fourth wave seems like it will be targeted areas as opposed to widespread.  The crude market continues to be in a push-pull relationship with many economic issues, but the range of the swing has become much more narrow.

In local retail news, gasoline prices have eased a little from recent highs, but not much.  I don’t see gasoline retail prices falling below $2.49/gallon anytime soon based on current market conditions.  Diesel cost has also balanced out which will keep retail prices from breaching $3/gallon which is good for farming, construction, and shipping this spring.

Propane prices continue to slowly unwind but not as fast as some would like.  I am not expecting very cheap summer fill prices below $1.  I also know that next season’s heating contracts will be priced higher than this year.  I highly recommend that customers take delivery of any remaining contract gallons on their account.  If propane prices start to drop dramatically, I don’t see that possibly happening until at least August.  Stay tuned for more info as we wind down the heating season and approach allocation building season.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford